Suppose Two Goods (X and Y)are Being Produced Efficiently and That

question 6

Multiple Choice

Suppose two goods (x and y) are being produced efficiently and that the production of x is always more labor intensive than the production of y.Production depends only on two factors (capital and labor) ;these may be smoothly substituted for each other.The total quantities of these inputs are fixed.An increase in the production of x and a decrease in the production of y will:

• A)increase the capital-labor ratio in each firm.
• B)decrease the capital-labor ratio in each firm.
• C)leave the capital-labor ratio for each firm unchanged.
• D)increase the capital-labor ratio in y production and decrease the capital-labor ratio in x production.

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An occurrence or happening that takes place once and is not repeated.

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A positive, close relationship marked by mutual understanding and trust.

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